By Julie Shapiro
Adding too much office space too quickly at the World Trade Center could spell disaster for the city’s real estate market, Chris Ward, executive director at the Port Authority, said this week.
Ward does not want to back the financing for Towers 2 and 3, which Silverstein Properties hopes to build at the site, because the Trade Center will already have two other office towers coming online in the next five years: One W.T.C. and Tower 4. Those new towers will present enough of a leasing challenge as financial firms shutter their Lower Manhattan offices, Ward told Downtown Express in an interview at the Port’s offices.
“The market we are all competing for is so limited,” Ward said Tuesday. “Saying we need to be thoughtful about the market isn’t being restrictive — it’s being realistic.”
The Port has fallen under fire from Larry Silverstein’s camp for not helping Silverstein finance Towers 2 and 3. Silverstein executives have accused the Port of being overly pessimistic about Downtown’s future.
Ward said that is not the case.
“The idea that somehow the Port Authority is restricting Silverstein from building or deterministically saying that the real estate market won’t be back is false,” Ward said. “He could build today if he had a tenant and someone lent him the money. When the market is back, it won’t be because the Port Authority said, ‘Come back.’… It will happen because of market forces.”
Larry Silverstein has not been able to get financing for Towers 2, 3 and 4 and has not yet signed any tenants beside the city and Port Authority. The Port, which is building One W.T.C., also known as the Freedom Tower, has reportedly offered to invest $1 billion in helping Silverstein build Tower 4 and build the infrastructure of Towers 2 and 3 to grade, with six-story retail podiums on top. But the Port wants Silverstein to wait to build Towers 2 and 3 until Silverstein can get private financing.
Silverstein replied with a counteroffer: He wants to build Tower 2 now, and is willing to wait on Tower 3. In response, the Port commissioned a Cushman & Wakefield report projecting that Tower 2 would take 11 years to lease if it opened in 2014 with the other buildings.
Citing a confidentiality agreement, Ward declined to discuss details of the $1 billion offer the Port made to Silverstein but said it was imperative that Silverstein accept and not continue holding out to build Towers 2 and 3 now.
“I just don’t see a Plan B,” Ward said. “The implications of that — I don’t want to consider them.”
If the Port and Silverstein do not resolve their dispute by the end of the summer or early fall, the site will see serious delays, Ward said.
Bud Perrone, a spokesperson for Silverstein Properties, said in a statement that the Port’s proposal would “put off finishing the rebuilding of the World Trade Center site for decades, based on pessimistic projections about the future of New York and Downtown’s economy. We obviously disagree.”
“It’s at a stalemate,” added a rebuilding source who spoke on condition of anonymity. The source guessed that the dispute will go into arbitration, just as a comparatively minor dispute did last fall.
In the meantime, the Port is planning ahead as though Silverstein agreed to the proposed deal. The Port is already designing the glossy, white retail podiums, but declined to release the renderings. They would be placeholders for Towers 2 and 3 for 10 to 15 years. Ward said the podiums could contain public space, perhaps like the World Financial Center’s Winter Garden, in addition to retail.
“In any other city, a six-story structure is a good-size building,” Ward said.
He gave examples of other towers in New York that were built on smaller structures, including the Hearst building in Midtown. Coincidentally or not, Lord Norman Foster designed the Hearst tower and is Silverstein’s architect at Tower 2.
Faith Hope Consolo, a retail broker, said the podiums could attract high-quality retail if the Port and Silverstein agreed to keep the stores in place for at least 10 years without beginning construction on the towers above.
“That’s still one of the most desirable retail locations Downtown,” Consolo said.
In planning for the future, Ward hopes to learn lessons from the leasing of the original World Trade Center, when the Port priced the millions of square feet of space below market value and dragged down the real estate market citywide. That’s what happens when public dollars are spent building office space without private demand, Ward said.
The rebuilding source said the leasing of Silverstein’s new office towers would look more like 7 W.T.C. than the original Trade Center. At 7 W.T.C., Silverstein priced the space above the surrounding market in the face of harsh criticism from the mayor and others, and waited until he found tenants who would pay his prices.
Like 7 W.T.C., the green Silverstein towers will draw from Midtown and outside of the city, not just poach tenants from other Lower Manhattan buildings, the source said.
“It’s space unlike anything else that’s here,” he said. And since few office buildings are rising now, new office space will be hard to find in the city five years from now, the source said.
Ward said it’s not up to the Port Authority to predict markets, but that the markets are making themselves clear and the Port is already offering to pump extra money into Silverstein’s ventures, just not as much as Silverstein wants. The Port is arguing that its offer is generous since without it, Silverstein would likely lose the sites under their 2006 agreement since he cannot build the towers as promised.
“We are in effect financing Larry Silverstein,” Ward said. “It was supposed to be a public-private partnership.”
Perrone, the Silverstein spokesperson, said that the Port hasn’t lived up to its end of the deal, since the Port has been late delivering the sites and announced last October that infrastructure like the PATH hub and Vehicle Security Center were years behind schedule.
Julie Menin, chairperson of Community Board 1, said that rebuilding the World Trade Center is imperative, but the Port Authority also has to be careful how much money goes to subsidize Silverstein.
“To build all these buildings on spec without any hope of getting a tenant in certainly isn’t responsible,” Menin said.
The site’s schedule has been another point of contention between the Port and Silverstein. Janno Lieber, president of Silverstein’s World Trade Center Properties, recently criticized the Port for not having a detailed construction schedule for the entire project to match the broad timeline released last fall.
A Port Authority official, who spoke on condition of anonymity, said Lieber was right that the detailed schedule does not exist. The official said Lieber was not wrong to be concerned, and the Port is working on building that type of schedule for some aspects of the project, like bringing steel at the site to grade.
“We’re concerned about it and we’re working on it,” the official said. “But I don’t think you necessarily have to say that the only way you know you can build it is if you have a whole schedule.”
Julie@DowntownExpress.com
